EU Will Propose Nov. 14 Volume of Carbon to Delay From Sales

Oct. 16 (Bloomberg) -- The European Union’s regulatory arm
will propose a detailed plan next month for curbing oversupply
in its carbon market, including the specific number of permits
it recommends selling in auctions at a later date.

“The European Commission will present the tailor-made and
proportionate impact assessment, as well as the necessary
details of the proposal on Nov. 14 so that member states can
take a decision before year-end,” Isaac Valero-Ladron, the
climate spokesman for the commission, said by e-mail yesterday.

The EU, which runs the world’s biggest cap-and-trade
market, is set to auction permits for the third phase of the
program beginning next year. The commission’s comment came after
Bloomberg New Energy Finance forecast that the bloc may delay
until early 2013 the details of its strategy to postpone
auctions of some permits to help carbon prices recover.

The commission’s proposal to trim sales planned for the
next three years will probably be intertwined with its
assessment for more permanent rule changes to prevent future
oversupply, said Matthew Gray, an analyst and trader at
Jefferies Group Inc. in London. The blending of short-term and
long-term policy consideration will probably make the bloc’s
carbon price subject to political influence through 2020, he
said today in an e-mailed research note.

“This is almost perfectly analogous with recent
developments in the euro,” Gray said. “Just like the European
Central Bank has threatened intervention and mentioned the
futility of shorting the euro, the commission could similarly
hold the carbon market to ransom.”

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EU emission permits for 2012 fell to a record low in April
after the financial crisis hurt industrial production and cut
demand from industry for pollution rights. That boosted a glut
of allowances to almost half of the average annual pollution
limit in the system. Allowances rose as much as 2.5 percent to
7.88 euros ($10.25) a ton in trading today on the ICE Futures
exchange in London and were at 7.80 euros at 9:41 a.m.

The premium for December EU carbon over United Nations
Certified Emission Reduction credits advanced as much as 2.6
percent to a record 6.39 euros.

EU Climate Commissioner Connie Hedegaard presented an
outline in July of a measure to postpone some auctions, a
practice known as backloading, and a draft amendment to the
bloc’s emissions-trading law to reassert the commission’s right
to decide the timing of carbon-permit sales.

Official Proposal

The number of permits to be delayed, which wasn’t specified
in the draft measure, will now be included in the official
proposal to be submitted to national governments on Nov. 14,
Valero-Ladron said yesterday. The package to be presented will
also include an impact assessment of auction delays and a report
on long-term potential options to improve the EU carbon market,
he said.

EU member states, whose support is needed for the
commission plan to take effect, are waiting for the assessment
and the report before taking positions on the backloading
option, according to the minutes from their Sept. 19 meeting
published in an EU database earlier this month.